Less than three months after buying downtown's high-profile Houston Club building with big plans for change, Cameron Management Inc. has sold the historic Esperson buildings nearby.

Ted Dom, a partner at Houston-based Cameron Management, says the company will use some of the proceeds from the Esperson sale to redevelop the Houston Club building, located at 811 Rusk. Although terms of the Esperson transaction were not disclosed, the 599,107-square-foot buildings -- located at 808 Travis St. and 815 Walker St. -- reportedly sold for close to $96 million.

The buyer was San Francisco-based Seligman Western Enterprises Ltd., which will mark its entrance into the Houston market through these buildings.

Proceeds from the June 15 sale would surely free Cameron up to make changes at the 18-story Houston Club building. When Cameron, along with a dozen local investors, purchased the building in March the company said it was considering turning the property into a hotel or high-end apartments (see "Houston Club building gets conversion-minded owner," March 23, 2007).

But Dom says the more likely scenario is that the building will remain an office tower and that the Houston Club's top four floors of space will be redeveloped into office space when the club's lease expires in 2015.

While some of the funds from the Esperson sale will go toward that undertaking -- Cameron had anticipated spending $30 million on an office conversion at 811 Rusk -- Dom says most of the proceeds will go toward a future acquisition in downtown Houston. However, he would not elaborate on that potential purchase.

Dom says he expects the Houston Club -- the city's oldest social club that dates back to 1894 and counts President George Bush among its membership -- to stay in place until its lease expires in about eight years. The Houston Club has been located in the building ever since the structure was opened in 1948 by developer Jesse Jones.

Dom says the first-level and tunnel retail space will also remain intact.

"The rest of the building is in good shape in terms of office space," he says. "A lot of the redevelopment is going to be more cosmetic on the storefronts, lobby and garage."

JP Morgan Chase, which occupies eight floors of office space in the Houston Club building, is scheduled to vacate the facility by the end of the year.

Timing is everything

Doug Wiley, Amstar Group's executive director, said the decision to part with the Esperson property -- also known as the Niels and Mellie Esperson buildings -- was not an easy one.

Amstar, a real estate private equity firm, and Cameron, which owns, manages, and leases office buildings, acquired the property in December 2004 for $48 million.

"It's tough to part with a good investment that has potentially some upside left and that continues to improve," Wiley says. "Being disciplined investors, we decided it was an appropriate time to sell."

Market occupancy and rental rates have accelerated over the past 30 months, and the attention being paid to Houston right now is "extremely aggressive," Wiley says.

Cameron's Dom agrees.

"There are a lot of properties coming to the market in Houston right now," he says. "I think the timing was right."

Justin Shapiro, director of acquisitions for Seligman Western, said his firm is declining comment on the purchase other than to note that it is currently Seligman's only property in the Houston area.

In a written statement, Cameron Management CEO Dougal Cameron points out that Houston's downtown vacancy rate was more than 20 percent, with Class A rental rates in the low $20s per square foot, when his company first purchased the buildings. These days, he says, vacancy is down to 10 percent, with rental rates in the low- to mid-$30s.

"More than ever, Cameron Management is bullish on Houston, and we believe in the resurgence of downtown," Cameron said.

Mellie Esperson built the 32-story Niels Esperson building in 1927 in honor of her deceased husband. In 1941, she added the 19-story Mellie Esperson building.

Designed by John Eberson, the Niels Esperson building is most recognizable by the three-story Roman cupola that sits atop the structure.

Richard Rudd, a broker with CB Richard Ellis who brokered the deal along with colleagues Kent Peters and Jared Chua, said in a statement that the property received multiple bids from private and institutional capital sources that had not previously pursued Houston acquisitions.

In the end, Amstar's Wiley says, Seligman won out because the firm brought the highest degree of certainty of closing to the table.

Earlier this year, Amstar sold an industrial development located at Beltway 8 and Bammel Road. The company is currently in Phase II development of LaCenterra at Cinco Ranch, a mixed-use project that is scheduled for completion in mid-2008.

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